Role of SMEs in the United States Market - Essay Example

Increasing the role of small business in the United s Market Small businesses are the backbone of the United States economy, which make them an important part of the economy; hence they should be given priority by the government. Most of the American population is employed by small and medium enterprises, which means that these enterprises support the majority of American households. The government should recognize the critical role that small businesses play within the economy and help them by providing the most conducive environment so that they may succeed. The government should ensure that the legislations governing small businesses are extremely efficient and promote the growth of SMEs instead of stifling their growth. The government should abolish restrictive policies that limit the expansion of most SMEs and put in place regulations that favor the operations of most SMEs. The small business sector is responsible for most of the new jobs created every year by creating over 50% of the total new jobs in the American economy (Zimmerer & Scarborough, 26). SMEs also contribute a significant portion of the total retail sales and consumption in the United States. This is a significant contribution to the GDP of the country, which should be encouraged by the government through enhancing the operating environment of these businesses. Many times the government ignores the contribution of small businesses to the overall economic strength of the country, especially when implementing economic reforms targeted at improving the economy. This is what will be highlighted throughout this paper, and suggestions will be proposed on ways to reverse the situation in favor of the small business community. Problem statement or need analysis The main problem being addressed in this paper is the glaring reality facing small businesses and the fact that the government has been ignoring these businesses in many of its economic policies. Economic policies made in recent times such as the American Recovery and Reinvestment Act, which was passed in 2009 fail to address the significant issues facing small businesses. Yet these are the same businesses creating employment opportunities for majority of the American workforce. As many large corporations in the United States have been downsizing the growth of small businesses has been expanding significantly. Currently, there are over 23 million small businesses in the United States with many more being started every day (SBA, 2007). These businesses account for over half on new jobs created every year within the United States, yet they are significantly underserved by the government, which is focused on promoting the big corporate companies. A good example of the neglect by the government of small business was during the financial crash and ensuing recession of 2009, where the government put in place programs to protect the big financial institutions from failing yet did not put any structures in place to cushion the small businesses. This is a clear indication of the government’s obsession with big businesses and their contribution to the economy, while ignoring the core foundation of the economy, which is built on small businesses. Many of the so-called big corporate companies ended up downsizing their employees and it was the small businesses that absorbed these workers as employees, whereas even some of those downsized started their own small businesses. In the early 2000s when the dot com bubble burst, most of the companies that suffered were small tech businesses, which were caught up in the bubble, yet even in this occasion the government moved in to protect the investors in these stocks leaving the small business owners to suffer alone. Many of the hedge funds that had bought the dot com stocks were cushioned from the full impact of the bubble bust by the government, but this was not the case for the innovative entrepreneurs who were left with insolvent companies. However, it is important that the government switches its focus from the big corporate companies and paid attention to the needs of the small business community. Small businesses really suffered during the recession as access to credit decreased with most lenders being unwilling to lend to them, yet the government did not bail the small businesses out, instead it concentrated on bailing out the big corporate financial institutions that had created the mess in the first place. It is no wonder that the economy is taking so long to recover, since the government is directing its efforts into the wrong sector of the economy. If the government continues to ignore the plight of small businesses, the economic recovery will keep stalling as most small businesses fail to create new employment opportunities due to lack of capital, as well as a conducive operating environment. SMEs have a significant contribution to the country’s GDP and will continue to have a significant role in the economy as more big corporate downsize and streamline operations within the country. Solution or recommendations The government needs to ensure that the policies created that affect trade serve the needs of small businesses better than has always been the case. Every policy should be critically scrutinized to ensure that it favors the operations of SMEs (Zimmerer & Scarborough, 56-7). One such move by the government to better serve the needs of SME was the unveiling of the Free Trade Tariff online tool that helps small businesses access information about the tariffs on over eighty percent of goods that are exported to over 20 markets abroad with which the united states has trade agreements. This has never been the case before as this information is free and easily accessible online, which will serve small businesses well in determining the tariffs on the goods they export to these specific markets. The website is easy to use with clear instructions and a user manual, and this may boost the number of exports by SMEs generating more revenue for the government and growing the economy at large. The government should not stop here, but should continue to conduct research on how SMEs currently export their goods and services as well as the barriers they face when trying to enter into new foreign markets. The government should also try to compare the market performance and competitive edge of small businesses in the United States as compared to those in other developed countries. After this research the government should come up with ways of raising the competitiveness of small US businesses in the international marketplace. Conclusion In inference, we have seen that the government has been ignoring small businesses in the past when making trade policies and financial plans for the country. However, it is evident that the government cannot continue with this trend as it will put the US economy in peril. For a stable and growing economy, the article has made it clear that the government should include SMEs when formulating and implementing economic policies. The government needs to take into consideration the significant contribution made by small businesses in relation to creating employment opportunities and contributing to the overall growth of the country’s GDP. There are several recommendations that the government can implement so as to benefit SMEs and most of them relate to foreign trade as this is an area with significant potential for future growth. By implementing the suggested recommendations the government will realize extensive growth in the economy due to the growth of the SMEs. Work Cited Baumol, W. J. (2005, December). Small Firms: Why Market-Driven Innovation Can’t Get Along without Them. Retrieved from http://www.sba.gov/advo/research/sbe_05_ch08.pdf. Zimmerer, T. W., & Scarborough, N. M. (2008). Essentials of Entrepreneurship and Small Business Management, 5th ed. Upper Saddle River, NJ: Pearson Education. Read More